Dell, Silver Lake Said to Reap 90% Gain a Year After LBO
By David Carey and Jack Clark
Sep 10, 2014 7:01 PM ET
A year after taking Dell Inc. private in a $24.9 billion buyout, Chief
Executive Officer Michael Dell and private equity firm
Silver Lake Management
LLC have made a paper gain of at least 90 percent on their investment,
two people with knowledge of the matter said.
Silver Lake last year invested $1.4 billion and Dell himself put in a
stake worth $4.2 billion to take the company private, with the rest of
the transaction financed by debt and cash from the personal-computer
maker. Now Dell’s equity value stands at $10.8 billion or more, based
on valuations of Hewlett-Packard Co. and other publicly traded rivals,
said the people, who asked not to be identified because the details
That’s almost two times the $5.6 billion that Silver Lake and the
company founder invested in the leveraged buyout. The CEO now owns 75
percent of the
Round Rock, Texas-based
company, and Silver Lake has a 25 percent stake.
Dell Chief Financial Officer Thomas Sweet declined to comment on the
numbers yesterday, as did Emily Levin, a Silver Lake spokeswoman at
Brunswick Group LLC.
The return adds up to an early victory for Dell and Silver Lake, which
undertook the buyout to turn the company around without public
scrutiny after it failed to quickly adapt to the mobile and
cloud-computing era. The deal faced controversy before its completion
on Oct. 29, 2013, with opponents including billionaire investor
Carl Icahn charging
that Dell and Silver Lake were paying too low a price for the buyout.
Icahn waged a battle to derail the deal, pushing the buyers to
ultimately sweeten their price.
Icahn didn’t return a request for comment yesterday.
At a Dell World conference in Austin,
Texas, this week for
customers and partners, Michael Dell said he “couldn’t be more pleased
with the positioning, the progress and the performance of our
The jump in Dell’s value over the past year stems from a surge in the
cash flow and a
decrease in debt, said the people familiar with the matter. Cash flow
is projected to rise above $3.5 billion for fiscal 2015, which ends in
January. That’s up from $3 billion at the time of the buyout, said one
of the people. The company has used much of the
cash flow to shrink
debt to around $15 billion, down from about $18 billion a year
earlier, the person said.
“Over the next couple of years, it’s our intention to be fairly
aggressive on debt paydown,” Sweet said in an interview.
Dell’s performance has been aided by an improvement in the PC
business. As of the third quarter, Dell had 13.3 percent of the market
for worldwide PC shipments, up from 11.9 percent a year ago, according
The PC market in general isn’t declining as quickly as projected. In
the third quarter, PC sales fell 1.7 percent, less than the
anticipated drop of 4.1 percent, as corporate demand holds up some
sales, according to IDC.
Dell plans to build upon the improving PC environment with more
offerings for customers so it can be what
Michael Dell calls an
“end-to-end” technology provider. Dell is working to expand
capabilities in areas like data center storage, software, security and
data analytics, said Sweet. The company also plans to increase
services to industries including health care and insurance.
Being private has helped Dell’s performance over the past year,
company executives said. The company has been able to make speedier
decisions without the distraction of board meetings and quarterly
financial analyst meetings, said Suresh Vaswani, president of the
When Dell bought data-analytics company
StatSoft Inc. in March,
the deal was done in two meetings, half the time it would have taken
if Dell was still public, said Prakash Jothee, vice president of
corporate strategy. Terms of the deal weren’t disclosed.
Dell can also afford to be choosier about which businesses to pursue,
without public investor scrutiny. As part of that, the company may
cede ground to low-cost server-computer rivals where profit margins
are declining, said Dell President Marius Haas.
“I’m not trying to be king of the zero profit pool,” Haas said. “I
want share gain, but I want profitable share gain.”
Some of Dell’s customers said the company has become more responsive
since going private. Jason Cook, chief technology officer of
BT Group Plc (BT/A)’s
North America Global Services division, said at Dell World this week
that he no longer faces the challenge of navigating through various
parts of Dell and that the company is tailoring products more quickly
for specific customer needs.
“The pace of stuff being deployed was once a year, now it almost feels
like once a quarter,” Cook said in an interview. “I’m not left
To contact the reporters on this story: David Carey in
New York at
Jack Clark in Austin at
To contact the editors responsible for this story: Pui-Wing Tam at
Christian Baumgaertel at
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